Real Estate Blog

Administration Undecided about Another Home Buyer Tax Credit:
Housing and Urban Development Secretary Shaun Donovan said Sunday on CNN’s “State of the Union” that the administration would “do everything we can” to stabilize the U.S. housing market.

Whether it will resurrect the first-time home buyer tax credit is up in the air. Donovan said that the drop in home sales in July was worse than the administration expected.

Donovan also said that the Federal Housing Administration will launch an emergency loan program to help unemployed borrowers stay in their homes and a program to help underwater borrowers refinance.

After that several Congressional candidates in Florida threw their voices behind the possibility, and Florida Gov. Charlie Crist then chimed in on the same show, saying that another tax credit, "would stimulate the economy. It would increase home sales in Florida." He finished with: "I would absolutely encourage the president to support that because it would certainly help my fellow Floridians."

So of course then I went the official route and followed up with a HUD spokesperson who responded:  "No news here...there are no discussions underway to revive the credit."

Is it all political? And is another tax credit the answer?  "I don't think it's all political," says housing consultant Howard Glaser. "I think they are panicked that the economy/housing got away from them." Glaser doesn't sound convinced the tax credit is really on the table.  "They can do a lot off budget with the GSE's and FHA with no Congress."

I know a lot of you out there would argue that a housing market correction, as painful as it is, is necessary for housing to truly find its footing again and recover for the long term. Another artificial stimulus could just prolong the agony and set us up for the same drop off in sales and prices that we're seeing right now. 

But it could also move some inventory quickly. With inventories of new and existing homes dangerously high, and the shadow supply of foreclosures pushing that volume even higher, more stimulus could be a necessary evil.